Investor Panel At Women 2.0 Conference Talks About Seed, Convertible Notes, Series A – And Introspection

Today’s Women 2.0 Conference on February 14, 2013 is being livestreamed here today and video will be available post-event.

By Angie Chang (Co-Founder & Editor-in-Chief, Women 2.0)

“Last year, 28 billion dollars was invested in ventures.. but yes, we’ve seen an uptake in seed funding,” said Andreessen Horowitz’s Scott Kupor. Moderator Sukhinder Singh Cassidy the investors – “when you say traction [for Series A funding], can you be more specific?” She continues, “You have media-driven models which are largely engagement, than find your monetization. Then you have subscription models and e-commerce.”

Scott returns with a string of questions for the entrepreneur, “What is the engagement and abandonment of these customers? What is the cohort analysis? What is the engagement over time?” Basically, prove that a small cohort is engaging with your startup, so the VC feels better to invest.

Intel Capital director Christine Herron talks about the question of convertible notes for entrepreneurs: “Regarding convertible notes – as entrepreneurs you spend more time fundraising over time, instead of doing it all in one big effort. You have some issues around your incentives and your focus.”

FLOODGATE partner Ann Miura-Ko stated: “As you need to be heard above the noise, having someone be on the hook for actually your success in raising your next round of financing can be very critical. As FLOODGATE, we like to say we are the lead investor in the round. We don’t say we are the co-lead or a passive investor – we really like to say we are on the hook. That means if times are really tough, we’re here to help. If you are having a tough time raising capital, we will vouch for you. As Scott was pointing out, it’s like college applications today. All these kids are really qualified with hundreds of house of community service. I’m a mom to 6, 3, 4 and 1 year old. You just have to be more awesome. Have investors at the seed stage level there to level-set your expectations that the dollars you have today will last until that point you have reached your milestones and Andreesseen Horowitz will invest in you.”

Kapor Capital partner Freada Kapor Klein said, “Be really thoughtful about who your investors are at each stage along the way – what are you looking for, what are their values, who is going to help you build the company you’re going to be proud of and who has done what to help you along that path. We are increasingly focused on social impact. We want the team of investors andt he founding tema to reflect the company base. If you are an ed-tech company and you want to create the world’s best STEM app for low-income kids, and you are a bunch of white guys who went to private schools your whole life, you’re like ‘really?‘”

Panel moderator Sukhinder Singh Cassidy asks the panel “Should every entrepreneur really raise a Series A?” She asks the VCs to image “what if you have some signals of success, some signals of failure… you’re at the fork in the road.”

Venture capitalist Christine Herron remarks “buried in that question you’re asking, do you actually have cash in the business or not? There is a question that a lot of people don’t realize – if you raise convertible notes, you don’t have to convert them – you can pay them back. Once your raise equity, you must sell your company some day and you have to sign up for that so we get our money back. You have to figure that out, if you are ready to start that large scale with an exit, then yeah go for that brass ring. But if you just want to run that business and not shoot for an exit, then think about not raising that equity capital.. maybe raise more money with angels that don’t mind.”

FLOODGATE’s Ann Miura-Ko explains, “their economics are such that, if exit at $100 million dollars, they’re OK with it but they’re not really excited. They get really excited if you hit $500 million dollars more. If you are at the stage where you are unsure, going to that stage is dangerous.”

Investor Freada Kapor Klein said, “If you don’t look like anybody that firm has ever given Series A money to, you should think twice, three times and a hundred times if they are committed to letting you stay at the front of that business.”

Moderator Sukhinder Singh Cassidy said, “I think the other key factor here is, are you enjoying it? Make sure you love it because it’s a five or ten year journey. Have a level of introspection – do you love the journey, really? Angel investors do sign up for a certain level of risk. You need to call whether your company will be one of those top 15 companies and do you have the drive to take it all the way. Sit and reflect – ‘is it for me?’ I think that is just the other introspection point. Seed to A is perhaps the one time where – if there is ever a time to hit the pause button – once you take the A, it’s all on you.”

Follow the conversation on Twitter with hash tag #w2conf today and shout out to Women 2.0 at @women2!

Angie Chang is Editor-in-Chief and Co-Founder of Women 2.0, a media company offering content, community and conferences for aspiring and current women innovators in technology. Our mission is to increase the number of female founders of technology startups with inspiration, information and education through our platform. Previously, Angie held roles in product management and web UI design. Angie holds a B.A. in English and Social Welfare from UC Berkeley. Follow her on Twitter at @thisgirlangie.